# What is my ROIC?

Computes return on invested capital (ROIC): operating income after tax (NOPAT) divided by debt plus equity minus cash, as a percent.

- Page: https://www.acalculator.org/finance/roic-calculator
- JSON spec: https://www.acalculator.org/finance/roic-calculator.json
- Version: 6be245a6cae3

## Default answer

Example with the default inputs (Operating income (EBIT) $1,000,000.00, Tax rate 25%, Debt $2,000,000.00, Shareholders’ equity $3,500,000.00, Cash and marketable securities $500,000.00): Operating income of $1,000,000.00 taxed at 25% leaves NOPAT of $750,000.00; on invested capital of $5,000,000.00, ROIC is 15%.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| ebit | Operating income (EBIT) | Earnings before interest and taxes for the year. Negative for an operating loss. |
| tax | Tax rate | The income tax rate on operating income, for example the effective or marginal rate. |
| debt | Debt | Book value of short-term and long-term borrowing on the balance sheet. |
| eq | Shareholders’ equity | Book value of equity on the balance sheet. Negative for a deficit. |
| cash | Cash and marketable securities | Cash the business does not need to run, taken off the capital. Optional. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| roic | Return on invested capital (ROIC) | NOPAT ÷ invested capital × 100. |
| nopat | NOPAT (operating income after tax) | EBIT × (1 − tax rate). |
| capital | Invested capital | Debt + equity − cash. |

## Method

NOPAT = EBIT × (1 − tax rate ÷ 100). Invested capital = debt + equity − cash. ROIC = NOPAT ÷ invested capital × 100.

## Assumptions

- Debt and equity are book values from the balance sheet, for example at the start of the year or the average of the start and end.
- The tax rate applies to all of operating income; an operating loss is taxed at the same rate (it saves tax).
- Arithmetic is exact on the typed decimals; ROIC shows to 2 decimals and money to the cent, halves up.

## Worked examples

1. ebit = $1,000,000.00, tax = 25%, debt = $2,000,000.00, eq = $3,500,000.00, cash = $500,000.00 gives roic = 15%, nopat = $750,000.00, capital = $5,000,000.00. Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (ROC or ROIC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm.
2. ebit = $120,000.00, tax = 0%, debt = $300,000.00, eq = $500,000.00 gives roic = 15%, nopat = $120,000.00, capital = $800,000.00. Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (ROC or ROIC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm.
3. ebit = -$80,000.00, tax = 22.5%, debt = $400,000.00, eq = $900,000.00, cash = $60,000.00 gives roic = -5%, nopat = -$62,000.00, capital = $1,240,000.00. Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (ROC or ROIC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm.
4. ebit = $43,000.00, tax = 21%, debt = $50,000.00, eq = $100,000.00 gives roic = 22.646667%, nopat = $33,970.00, capital = $150,000.00. Source: OpenStax, Principles of Finance, 6.4 Solvency Ratios (Clear Lake Sporting Goods: EBIT $43,000, equity $100,000) and 5.5 The Statement of Cash Flows (notes payable $50,000). https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios.

## FAQ

### What is ROIC?

Return on invested capital (ROIC) is the operating income a business earns after tax, as a percent of the money its lenders and owners have put in. It measures how well the business turns capital into operating profit, before the effects of how it is financed.

### How do I calculate ROIC?

Multiply operating income (EBIT) by 1 minus the tax rate to get NOPAT. Add debt and equity at book value and subtract spare cash to get invested capital. Divide NOPAT by invested capital. EBIT of $1,000,000 at a 25% tax rate is $750,000 of NOPAT; on $5,000,000 of invested capital, ROIC is 15%.

### Why subtract cash from invested capital?

Cash and marketable securities earn interest, not operating income, so keeping them in the capital would understate the return on the assets that run the business. If the business needs its cash to operate, leave the cash box empty.

### How is ROIC different from ROE and ROA?

ROE divides net income by equity alone, so the amount of debt a company carries changes it. ROA divides by total assets, including assets paid for by suppliers and other non-interest-bearing liabilities. ROIC uses operating income after tax over the debt and equity invested, so it compares businesses that are financed differently.

### What is a good ROIC?

Compare ROIC with the cost of capital (WACC). A business that earns more on its capital than that capital costs creates value; one that earns less destroys value. ROIC also varies widely by industry, so compare similar companies.

### Can ROIC be negative?

Yes. An operating loss gives a negative ROIC. EBIT of −$80,000 at a 22.5% tax rate is −$62,000 of NOPAT; on $1,240,000 of invested capital, ROIC is −5%. This calculator needs invested capital above $0.

## Sources

- Aswath Damodaran, NYU Stern School of Business, Variables used in Data Set: return on capital or return on invested capital = after-tax operating income ÷ book value of invested capital, ROC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm (retrieved 2026-10-19)
- Aswath Damodaran, The Little Book of Valuation, Measures of Profitability: return on capital relates operating income to the capital invested in the firm, the book value of debt and equity net of cash and marketable securities; after-tax ROC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/profitability.htm (retrieved 2026-10-19)
- OpenStax, Principles of Finance, 6.4 Solvency Ratios: operating income is earnings before interest and taxes (EBIT); Clear Lake Sporting Goods has EBIT of $43,000 and stockholder equity of $100,000. https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios (retrieved 2026-10-19)